MONTREAL - Domtar Corp. says lower sales and higher costs squeezed profits in the fourth quarter, driving net income sharply lower compared with both the previous quarter and the same quarter a year ago.

The Montreal-based paper maker (TSX:UFS) said net income dropped to US$19 million or 54 cents per share in the three months ended Dec. 31,

That's down from US$61 million, or $1.63 per share, in the fourth quarter of 2011 and US$66 million, or $1.84 per share, in the third quarter of 2012.

Adjusted earnings for the three months ended Dec. 31 were also down year-to-year and quarter-to-quarter, dropping to $46 million or $1.31 per share — nine cents per share below analyst estimates compiled by Thomson Reuters.

Domtar's revenue was also down, but not by much — falling about $70 million to $1.33 billion from $1.4 billion.

Domtar said it experienced both lower selling prices and volumes as it coped with higher costs.